Don't Count on Silicon Valley to Revive Housing Market

Silicon Valley is the economic engine of the Bay Area, but it is not as dominant as many people seem to believe. Take a look at the chart, below, which shows technology sector employment in the Bay Area over the last twenty years.

The numbers in the chart were obtained from California's Employment Development Department. I've defined the technology sector to include computer design and manufacturing, research and development, internet, and software development.

The first thing to notice is that the tech sector is not all that large. There were 250,000 tech jobs in September of 2009. That represents only 15% of the 1.7 million jobs in the San Francisco and San Jose metro areas. And keep in mind that many tech jobs are in supporting roles such as secretarial, accounting, and sales.

The relative size of the tech sector surprised me. What surprised me even more, however, was that the number of tech jobs has never re-approached its dotcom peak. The number of tech jobs in September of 2009 was 33% lower than it was at the peak, and only 10% higher than it was 20 years ago.

The tech sector exerts a significant influence on the Bay Area housing market. Technology employees usually earn high salaries, so they can afford to pay top dollar for homes. But at only 15% of all jobs, the tech sector doesn't dominate the housing market. And judging from the record of the last twenty years, it isn't becoming significantly more important.

Note: Thanks to one of my readers, who pointed out that I had mistakenly compared the number of tech jobs in the San Francisco and San Jose metro areas to the total number of jobs in California. That was an embarrassing mistake. The correct comparison is not as striking as my original, erroneous comparison, but the original conclusion remains valid: The tech sector does not dominate the Bay Area housing market, and does not appear to be headed that way.